Company

Japan

US

UK

Sony

68.1%

63.0%

69.3%

Nintendo

30.0%

36.0%

24.7%

Sega

1.9%

0.5%

2.7%

Can Sony continue its leadership with the Playstation 2? Fact: No company has ever been able to sustain market dominance from the previous generation to the next. Nintendo lost market share to Sega with the transition of the NES to the SNES. Sega lost market share to Sony with the transition of the Genesis to the Saturn. Will Sony suffer the same fate?

Sega is the underdog fighting from the bottom with nothing to lose. Sony is the king trying to keep the kingdom his. Nintendo is the wise old man, the ever-surviving veteran of the industry.

With each company prepared for a show down, each armed with its own distinct strategy for conquering the market, it will be interesting to see how the console war plays out.

Here are a few fun estimates to ponder with:

• 22 million people 18 and under have gaming as their primary internet activity
• 68 million gamers will be only by 2003
• Console video game market value this year: expected 15 billion dollars
• 24% of video gaming revenue will come from online gaming by 2002

Sony Computer Entertainment (SCE)

SCE is a subsidiary of the Sony Corporation and is responsible for overseeing the Playstation and related businesses.

Company at a glance:

Sony's strategy for the Playstation 2:

• Backwards Compatibility with Playstation games will entice Playstation owners to buy the Playstation 2 without worry of obselete software. Expect a trade-in program when the Playstation 2 is launched in the U.S.
• Most analysts are predicting a $299 launch price in the U.S. and 299 pounds (or the equivalent) in Europe.
• Playstation 2 doubles as a DVD player; Sony hopes for this to be a selling point for households and to justify the high price tag. This strategy seems to have worked well in Japan; more than 76% of a poll indicated that they bought the PS2 as a DVD player and game machine.
• Sony designed the Playstation 2 to be a very networkable machine. The machine has interfaces that are compatible with many standards in other industries (i.e. electronics and computer). The Playstation 2, however, does not offer connectivity out of the box and lacks a built in modem or ethernet card. Sony has stated that their Playstation 2 network will not be ready until 2001 at the earliest.
• Sony has always had the edge in marketing over competitors Nintendo and Sega and will no doubt continue to exploit this advantage this fall when the Playstation 2 launches in the U.S.

An gaming enthusiast camps out for the Playstation 2 launch (left) and lines gather in anticipation in a store in Tokyo's electronics district, Ahkibara (right)

Did you know?

• There is one Playstation in every four U.S. households.
  
• The Playstation game system accounts for 11% of Sony's total worldwide sales but make up approximately 40% of Sony's profits in 1998.
• Sony sold 980,000 units in two days (pre-order campaign included) but was only able to ship 720,000 units due to memory card manufacturing problems.
• To date, there are have been 21 Playstation titles that have been found to be incompatible with the Playstation 2.
• Selling the Playstation 2 for 39,800 yen in Japan makes Sony lose about US$200 for every unit hardware sold. Hardware manufactures usually take a loss early in a console's lifecycle and make up for it in licensing fees.

Nintendo Company, Limited

The Nintendo 64 is entering its decline phase; Nintendo still owns some of the most valuable intellectual property.

The company at a glance:

Nintendo Co., Ltd. 1999 Sales (mil.): $4,806.0 1-Yr. Sales Growth: 19.7% 1999 Net Income (mil.): $720.5 1-Yr. Net Income Growth: 14.6% 1998 Employees: 1,002 1-Yr. Employee Growth: 2.2%

Nintendo's strategy for 2000 and 2001:

• Nintendo has a reputation and track record of announcing hardware to slow the momentum of its competitors with every intention of delaying hardware until ready. This is apparently the case with Nintendo's Dolphin; Nintendo had originally announced a Winter 2000 launch in Japan and America but has since pushed back the U.S. release date to some time in early 2001. Most analysts do not believe Nintendo can launch this year.
• Nintendo has announced that it will be focusing on a games only approach for the Dolphin, a clear reference to Sony's DVD and Sega's Internet strategies. The Dolphin will use a DVD drive but will not play DVD movies and Nintendo expects to be able to produce the console more cheaply. There are persistent rumors that Nintendo will aim for a US$150 launch price, a stark contrast to Sony's US$400 Playstation 2 (in Japan) and Sega's US$199 Dreamcast (in the U.S.).
• A big complaint of the Playstation 2 is its difficult development architecture; Nintendo seeks to address that by promising a friendly programming environment for the Dolphin.
• Nintendo is partnering up with manufacturing giants such as Matsushita, and have indicated an early interest in outsourcing hardware production.
• Nintendo owns some of the most recognizable intellectual property in the market (Pokemon, Mario, Zelda, etc.) and the industry's best designers, such as Shigeru Miyamoto.
• Nintendo meanwhile still has a stellar 1st party line up for the Nintendo 64 that should appease users to a degree for the rest of 2000.

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Will blockbuster titles like Perfect Dark keep Nintendo 64 owners happy?

Did you know?

• In an interview, a Nintendo representative claimed that that its new Dolphin console will be 33% faster than Sony's Playstation 2 and twice as fast as Sega's Dreamcast. Analysts have attributed this percentage as the CPU's processor clockspeed.
• Pokemon is a US$7 billion industry in of itself, and Nintendo is the primary beneficiary of the franchise's explosive growth.
• Nintendo is aiming to release its Game Boy Advance--successor to the Game Boy and Game Boy Color--in 2001 alongside the Dolphin.

Sega Enterprises

Sega of America launched the successful Dreamcast on 9/9/1999. It has sold nearly 2 million units since then, making the Dreamcast the fastest selling console in U.S. history.

Company at a glance:

SEGA Enterprises 1999 Sales (mil.): $2,234.9 1-Yr. Sales Growth: (10.3%) 1999 Net Income (mil.): ($360.0) 1-Yr. Net Income Growth: -- 1999 Employees: 3,974 1-Yr. Employee Growth: (0.2%)

Sega's Dreamcast strategy:

• Sega is heavily positioning itself in the Internet. The Dreamcast comes with a built in 56 kps modem, allowing users to use the Dreamcast has an Internet machine (surfing the web, e-mail, and chat are all possible). Peripherals such as a ZIP drive, MP3 player are planned and a keyboard is already available.
• Sega recently announced the IPO of Sega.com, a spin off from Sega of America. Sega.com is essentially an Internet Service Provider (ISP)that offers consumers (not just Dreamcast owners) an optimized gaming network that also offers the benefits of traditional ISPs for $21.95 a month. To kick start this program, Sega announced that it will issue a $200 rebate (enough to buy a Dreamcast) to anyone that signs on for 2 years with the ISP.
• Sega is planning a second launch of the hardware this Fall as their network plan enters its final phase. It will have several key titles to take advantage of the network.
• Sega's strong software arcade divisions will continue to provide titles for translation on the Dreamcast. The NOAMI, Sega's standard arcade board, shares the same architecture as the Dreamcast.
• Sega will no doubt take advantage of its year headstart on Sony to achieve manufacturing economies of scale. Expect the Dreamcast to sell at US$150 in the U.S. when the Playstation 2 launches this fall.

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Quake 3 Arena will be a major title to take advantage of the Dreamcast's network

Did you know?

• Sega is producing a Dreamcast MP3 Player that will allow users to go online and download music. The MP3 player holds 64 MB of data and will cost less than $100.
• In March 2000, the first online, fully-networked multiplayer console game was released on the Dreamcast; it was called Chu Chu Rocket. In Japan, however, Sega has already launched several titles that are fully playable over the Internet. That's because Japan has only 2 servers, whereas the U.S. and Europe has more than 200 servers (hence the delay in both markets).
• 20% of Dreamcast customers are registered for the Sega Dreamcast network